What Is a Crypto Brokerage and How Does It Work?
A crypto brokerage lets you buy and sell crypto through one firm, which usually holds your coins. Balances are not covered by FDIC or SIPC insurance.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
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- Open and fund an account, then place orders.
- Custodial means the firm controls the private keys, not you.
- A brokerage acts for you; an exchange lets you trade directly.
The account agreement decides what you can do with the balance. Some firms serve individual customers, and others serve businesses.
What Is a Crypto Brokerage?
A crypto brokerage is a service that lets you buy and sell crypto through one company. The company usually holds the crypto for you, so you do not manage a private key.
How Does It Work?
You open an account, fund it, and place orders the brokerage executes for you. The firm may act as your counterparty. That means it takes the other side of your trade. Other times it routes the order to a market maker or an exchange.
What Are the Custody Risks?
In a custodial account, the brokerage controls the private keys, not you. Private keys are codes that let someone move crypto on the blockchain. If the firm fails, you depend on its records.
Is My Crypto Insured?
Crypto brokerage balances are not covered by FDIC or SIPC insurance like bank or stock accounts. Neither program covers crypto held at a crypto brokerage.
Brokerage vs Exchange
On an exchange, you trade directly with other customers or on its order book. At a brokerage, the firm buys and sells for its clients and may hold the assets.
Frequently asked questions
Usually yes, if the brokerage allows withdrawals. Some brokerages do not support withdrawals at all.
Customer claims usually go through bankruptcy. FTX entered Chapter 11 bankruptcy on November 11, 2022.
You usually have a contractual claim on the crypto the firm holds. The account agreement defines that claim.
